The acquiring party is indeed an investor group led by private equity firm Silver Lake Partners, who likely paid the bulk of the amount Skype was sold for.
The new investors will buy approximately 65% of Skype, with eBay continuing to own 35%, in a deal valuing Skype at $2.75 billion US. eBay is expected to receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.
Worth noting: Andreessen Horowitz partner Marc Andreessen sits on the eBay Board of Directors.
Ebay had reportedly been looking to sell Skype for $2 billion, compared to the $3.1 billion it put on the table to buy out the company and pay out its founders Niklas Zennstrom and Janus Friis back in 2005. Since then, eBay has written down nearly a billion dollars of the deal value after realizing the supposed synergies weren’t going to pan out as planned. Skype is said to be making approximately $600 million a year in revenues, so it seems like the investor group acquired the company at a very reasonable price.
Earlier this year, eBay had announced that they would be spinning off the company in an IPO in 2010. As Michael noted when he broke the news about the impending deal that was confirmed today, these announcements are often made to generate acquisition offers from potential suitors. If Skype will ultimately be floated on the stock market in the near future remains to be seen.
Full release is below, and bares no mention about the litigation currently at hand between eBay and its initials founders over key Skype technology.
Full press release:
eBay Inc. (NASDAQ:EBAY) today announced it has signed a definitive agreement to sell its Skype communications unit in a deal valuing the business at $2.75 billion. The buyer, who will control an approximately 65 percent stake, is an investor group led by Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board. eBay is expected to receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million. The company will retain an approximately 35 percent equity investment in Skype. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.
“This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype,” said eBay Inc. President and CEO John Donahoe. “We’ve acted decisively on a deal that delivers a high valuation, gives us significant cash up-front and lets us retain a meaningful minority stake with talented partners. Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses. As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum.”
Commenting on the deal, Egon Durban, managing director at Silver Lake, said: “Skype is an innovative, next-generation company that has changed how people and businesses communicate with each other. This transaction benefits all parties involved and will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group. Josh Silverman has done a strong job leading the company and we look forward to working with Josh and his team to grow the Skype franchise.”
In April 2009, eBay announced plans to separate Skype from the company, beginning with an IPO in 2010. The decision followed a year-long review of Skype within eBay’s portfolio. As it prepared for an IPO, the company said it would naturally consider bids for Skype that offered an attractive valuation. Donahoe said the deal offered by the investor group achieved that.
“This deal achieves our goal of delivering short- and long-term value to eBay and its stockholders, without the possible delays and market risk of an IPO,” Donahoe said. “Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay.”
Acquired by eBay in 2005, Skype has strengthened considerably since early 2008 when Donahoe was named eBay’s CEO and tapped company executive Josh Silverman to lead Skype. Silverman has driven strong momentum while building a new management team and delivering a series of Skype innovations such as software upgrades with dramatically improved video and calling quality, the widely popular Skype iPhone app and mobile partnerships with companies such as Nokia and Hutchison. In 2008, Skype generated revenues of $551 million, a 44 percent increase compared to 2007. Total eBay Inc. revenues for 2008 were $8.5 billion. Registered Skype users reached 405 million by the end of 2008, a 47 percent increase from 2007. Skype is attracting hundreds of thousands of new users each week.
(Image via E24)